LOCAL communities are being courted to invest their cash in renewable power projects by a green energy expert, who is in talks with the Scottish Government to roll out his new financing model.
Doug Prentice, chief executive of GeoCapita, described the model he has developed as “public, private and community” (PPC), which he believes is more sustainable than private finance initiative (PFI) schemes.
The firm, which has offices in Edinburgh and London, is putting together detailed proposals to deliver large capital investments into renewable energy projects and energy-efficient housing.
Prentice said: “The Scottish Government, which is probably ahead of anywhere else in the UK in this space, is very supportive of the PPC model. They’re putting together some very innovative finance mechanisms, one example of which is their renewable energy investment fund.”
The £103 million investment fund, unveiled by energy minister Fergus Ewing in March, is aimed at supporting communities and rural businesses to develop their own local renewable energy projects.
Prentice, who has worked in the finance sector for 30 years and is a lecturer in renewable energy finance at Napier University, said: “The Scottish Government wants to use the £103m as a mechanism to leverage in much larger amounts of capital. We’ve been asked, as have some others, to make a formal submission to set out which projects we can work on, using private and community finance.”
GeoCapita, which is also presenting its PPC model to the Welsh Assembly government and the United Nations, has designed a low-cost fund management structure as part of its strategy to attract small-scale investors and increase community involvement in project funding.
Prentice said: “Typically, annual charges for fund management can be between 2.5 and 3 per cent, with an initial charge anywhere between 3 and 6 per cent, and that eats up a lot of the performance for small investors’ capital.
“So we’ve designed a structure with a 1 per cent initial charge and 1 per cent annual charge, which makes it accessible to people with small amounts to invest.”
He added: “We’ve set up a mechanism where individuals can invest anything from £500 upwards. For those who don’t have that, or grandparents who want to set up something for their grandchildren, we could set up a monthly savings scheme of £20.”
The firm is also seeking to tap into private sector finance and Prentice said a wide range of financial institutions have shown an interest.
Returns for investors could range from 7 per cent from solar schemes in Scotland to as high as 30 per cent for hydro power, he said.
Prentice said: “For a blended mix, you’re looking at returns of 12 to 13 per cent. We don’t just rely on sales people saying these schemes will generate certain amounts of electricity, we work with independent consultants and research institutes.”
He admitted it may take time for communities to become comfortable investing in renewable projects rather than trusting their savings to a bank, but he believes the model is low risk because it offers “real assets” capable of generating a fixed income.